My Time at Enron: For the Record (again)

The Institute for Energy Research (IER) and its advocacy arm, the American Energy Alliance (AEA), are in the news.

As reported last month in the Los Angeles Times, and more recently in Bloomberg Politics, IER/AEA are involved in the free-market directions that the president-elect and his team have followed to date.

One account described the founding of IER as follows:

The Institute for Energy Research was founded to be a clearinghouse for energy information in 1989 in Houston by Robert L. Bradley Jr., a speechwriter for Enron chief executive Kenneth Lay, who was later convicted of securities fraud.

Given that this association is part of the political conversation (Joe Romm started it in 2009: see below), and the continuing attention that is ahead for IER/AEA, I wish to revisit the historical record about my time at Enron that overlapped with IER. [1]

IER Founding

I founded IER back in 1989, paying a law firm to make a name change with a small free-market outfit that had gone dormant, the Institute for Humane Studies of Texas. At the time, I was a full-time employee at Enron, working at the interstate gas transmission company, Transwestern Pipeline. And in 1995, I took a new job at Enron in corporate, Director of Public Policy Analysis, where, among other things, I wrote speeches (the first draft anyway!) for CEO Lay.

With the publication of my first energy policy book in 1989, and with a treatise on oil and gas regulation on the way, I was busy giving lectures to the free-market community (including at the Cato Institute, where I was an adjunct scholar at the time). With all this, I needed a formal affiliation outside of Enron for my classical liberal (libertarian) energy activities.

IER was my night and weekend work; Enron was my day job. I never asked Enron or Ken Lay to contribute to IER, and IER never received any contributions from anyone associated with the company. That would have created a double conflict of interest, and as the outside world knows, I had major differences with the company over its climate change advocacy and renewable energy subsidies (also see here).

IER was less a “clearinghouse for energy information” (per Bloomberg above) as a principled think tank (or think bucket in the early days) focused on the intersection of energy and history and public policy from a private property, free-market perspective.

Joe ‘Ad Hominem’ Romm

I explained the IER/Enron connection back in 2009 when Joe Romm of the Center for American Progress insinuated that I was a corporate lackey at best and a deceiver at worst. “The latest polluter front group trying to kill the clean energy bill is overseen by a proud former shill for a man convicted on fraud and conspiracy charges,” Romm posted at Climate Progress.

IER is hardly a “front group;” we are a principled classical-liberal think tank that is pro-private property rights, pro-market exchange, pro-consumer, pro- taxpayer, and pro-scholarship. AND we are pro-environment in that 1) wealth is health and 2) carbon dioxide (CO2) is not a pollutant but an ecosphere building block.

Here is an excerpt from my May 5, 2009, post that explains some of the back history of Joe Romm, Rob Bradley, and Enron. There is quite an irony of Romm and Enron that I document below. Romm has never tried to rebut his association with Enron and the failure of his Enron-akin nonprofit, the Center for Energy and Climate Solutions.

Joseph Romm and Enron: For the Record

[Joe Romm’s] implication is that I am somewhere between a dunce and a fraud because of my association with Enron and Ken Lay. But Romm should know better. He and I had email wars when I was at Enron, and Joe was Enron’s cheerleader, even complaining to his “friends” there about me.

Here is the background, as told in my book Capitalism at Work (p. 311):

Turning from the supply side to the demand side, Enron excited environmentalists (as well as stock analysts) with Enron Energy Services (EES), known in the trade as an energy service company (ESCO). EES offered energy outsourcing services for large commercial and industrial customers under long-term contracts. Under these contracts, the company and Enron would split the energy-cost savings, at least theoretically. Who could complain about private-sector strategies that saved money and reduced energy usage and emissions at the same time?

EES co-chairman Thomas E. “Tom” White estimated the customer cost savings around 20 percent. Ken Lay put the energy-use savings near 10 percent, which inspired some within the company to advocate certifying customers as “Kyoto compliant” (the idea was ultimately rejected).

But such reductions were only the beginning, according to energy conservationists Amory Lovins and Joseph Romm. They preached in articles, books, and talks that so much more energy savings and greenhouse gas emission reductions were profitable that compliance with the Kyoto Protocol was possible, if not easy.

“ESCO’s are DEFINITELY the future,” Joe Romm emailed Enron. In his book Cool Companies (1999), Romm wrote: “Cool buildings that cut energy use—and hence greenhouse gas emissions—in half are increasingly commonplace.” He saw massive opportunities for easy savings. “The entire notion that low-hanging fruit is easily exhausted turns out to be a myth,” Romm wrote in italics.

EES bought 200 copies of Cool Companies to give to existing and potential customers. The respect was mutual. Enron is “a company I greatly respect,” Romm emailed.

Again, Romm was the  fan of Enron’s “energy sustainability” initiatives, not me. While he was lauding Enron to Enron, as well as to his external audiences, I was fighting Enron’s climate alarmism and “green” energy ploys (windpower, solar, etc.).  Some Enron executives wanted me fired … and I paid the price for my views come compensation time.

So allow me to turn the tables. The public policies that Joseph Romm promotes today are the same ones that the late Ken Lay promoted during Enron’s heyday, as I have documented in Capitalism at Work. The party in power is also following the Enron playbook.

Romm’s Cool Companies was the calling card of one of Enron’s most fraudulent divisions, Enron Energy Services. EES was telling the world about all the energy savings they were capturing in their outsourcing contracts–savings that the customers themselves could not find with their own in-house energy engineering. But the contracts promised them savings, so many companies signed (see below).

And sure enough, the easy fruit of energy savings was really not so easy to pick. Enron was manufacturing savings via “mark-to-model” accounting where arbitrary assumptions created paper (GAAP) profits that were net-present-valued and reported as current-quarter earnings. The grandiose claims in Cool Companies about easy costs savings (gee–the companies did not see it, but Enron’s smartest did!) were exactly what EES needed to get the customers–and analysts–to drink the Kool-aid.

And that’s why Joe Romm was Enron’s favorite, and Enron was Joe Romm’s favorite.

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[1] The comments to this critical post about me, Enron, and AEA (also from in 2009) is also explanatory.